July Overall Housing Starts Dip, But Single-Family Starts Solid

HUD and the Census Bureau on Friday said July housing starts fell by 4 percent from June–although not because of single-family activity.

The report said privately owned housing starts in July fell to a seasonally adjusted annual rate of 1.191 million, 4 percent below the revised June estimate of 1.241 million but 0.6 percent higher than a year ago (1.184 million). Single‐family housing starts in July rose by 1.3 percent to 876,000 from June’s revised 865,000. The July rate for units in buildings with five units or more fell by 17.2 percent in July to 303,000 units from June’s revised 366,000 and fell by 4.7% from a year ago.

Regionally, results were mixed. In the largest region, the South, starts fell by 4.3 percent in July to 600,000 units, seasonally annually adjusted, from 627,000 in June and fell by 4 percent from a year ago. In the West, however, starts rose by 1.3 percent to 316,000 units in July from 312,000 units in June and improved by 13.7 percent from a year ago.

In the Midwest, starts fell by 6.2 percent to 181,000 units in July, seasonally annually adjusted, from 193,000 units in June but improved by 1.7 percent from a year ago. In the Northeast, starts fell by nearly 14 percent in July to 94,000 units from 109,000 units in June and fell by nearly 5 percent from a year ago.
“The drop in housing starts in July was driven by a sharp 17 percent decline in multifamily starts, especially in the Northeast,” said Mike Fratantoni, Chief Economist with the Mortgage Bankers Association. “Nationally, single-family starts were up for the month and the year.”

Fratantoni noted MBA reported last week (https://www.mba.org/2019-press-releases/august/july-new-home-purchase-mortgage-applications-increased-312-percent) that applications for new home purchases increased in July. “We anticipate that builders are going to react to this pickup in activity, along with extremely low mortgage rates, by increasing the pace of construction,” he said. “Permits, which lead starts, were up in July as well, so there is some indication of momentum. However, although builder confidence is high, the number of open construction jobs is also high, and the lack of skilled labor continues to be a constraint on the overall pace of building.”

Odeta Kushi, Deputy Chief Economist with First American Financial Corp., Santa Ana, Calif., said despite the July drop, housing starts signal some confidence amid recent market turbulence.

“While in recent months housing starts have slowed, July’s 1.9 percent year-over-year gain in single-family housing starts demonstrates homebuilders remain confident,” Kushi said.

Mark Vitner, Senior Economist with Wells Fargo Securities, Charlotte, N.C., agreed that housing appears stronger than the current data suggest.

“The apartment market is topping out, particularly in higher-price markets in the Northeast and parts of the West,” Vitner said. “July’s weak housing data are difficult to square with the improving trend in the Wells Fargo/NAHB homebuilders’ survey, which rose one point to 66 in August on stronger buyer traffic. We suspect single-family construction will eke out a modest gain for the year.”

HUD/Census said privately owned housing units authorized by building permits in July rose to a seasonally adjusted annual rate of 1.336 million, up by 8.4 percent from June’s revised 1.232 million and 1.5 percent higher than a year ago. Single‐family authorizations in July rose by 1.8 percent to 838,000; authorizations of units in buildings with five units or more rose to 453,000 in July, up by nearly 25% from June (363,000) and up by 9.2% from a year ago.

The report said privately owned housing completions in July rose by 7.2 percent to a seasonally adjusted annual rate of 1.250 million from June’s revised 1.166 million and 6.3 percent higher than a year ago. Single‐family housing completions in July improved by 4.3 percent from June to 918,000; the July rate for units in buildings with five units or more rose to 321,000, an increase of 16.7% from June (275,000) but down by 9.1% from a year ago.